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Import duty cut may hurt cement stocks

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`Move will not have financial impact but to affect sentiment'

Suresh P. Iyengar

MumbaiApril 3The Government decision to help cement imports by scrapping 4 per cent additional import duty and 16 per cent countervailing duty may hit cement stocks on Wednesday.

Most cement stocks have been under pressure ever since the Government got into the job of managing cement prices. Big cement company stocks have taken the maximum hit.

Over the week, ACC has dipped 4.05 per cent to Rs 704 on Tuesday, Madras Cement plunged 4.7 per cent to Rs 2,620, Dalmia Cements Bharat fell 3.45 per cent to Rs 366.50. A year ago, Madras Cements was quoting at a high of Rs 3,698, ACC Rs 1,192 and Dalmia Cements Bharat at Rs 460.

Imports difficult

"As far as cement imports are concerned it is a high volume, low value commodity. Our ports are not equipped to handle huge quantities to make imports feasible. Storage, transportation and handling will add to the cost. Imports are possible only by large consumers," said a cement company official.

A minimum consignment of cement imports should be 25,000 tonnes to make it cost-effective. A large cement project at best can consume 2,000 tonnes per month except hydropower projects, which consume about 4,000-5,000 tonnes per month. Cement has a two-month shelf life.

Though the Government measures are unlikely to have any financial impact on cement companies, it may hit investor sentiment. "The Government move will not have any financial impact but it is sure to affect investor sentiment. Cement prices in the Indonesian markets are quoting at around $45 per tonne while the average prices in India are around Rs 220 per 50 kg bag. With the fresh Government sops, the landed cost of Indonesian cement will be on par with local prices. However, handling and transportation costs could make it costlier. This apart, none of our ports are capable of handling cement imports," said Mr Hitesh Agarwal, Senior Research Analyst, Angel Borking Ltd.

Recently, Pakistan had sent a shipment of 10,000 tonnes cement for sampling. "The prices in Pakistan are higher at Rs 260-270 per bag (50 kg). Even if they offer concessions for bulk exports, it is not going to be feasible," said Mr Agarwal.

(This article was published in the Business Line print edition dated April 4, 2007)
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